Correlation Between Mineral Res and Nova Minerals

Can any of the company-specific risk be diversified away by investing in both Mineral Res and Nova Minerals at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Mineral Res and Nova Minerals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mineral Res and Nova Minerals Limited, you can compare the effects of market volatilities on Mineral Res and Nova Minerals and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Mineral Res with a short position of Nova Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mineral Res and Nova Minerals.

Diversification Opportunities for Mineral Res and Nova Minerals

-0.15

Correlation Coefficient

Mineral Res  Nova Minerals

Good diversification

The 3 months correlation between Mineral and Nova is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Mineral Res and Nova Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Minerals Limited and Mineral Res is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Mineral Res are associated (or correlated) with Nova Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Minerals Limited has no effect on the direction of Mineral Res i.e., Mineral Res and Nova Minerals go up and down completely randomly.

Pair Corralation between Mineral Res and Nova Minerals

Assuming the 90 days horizon Mineral Res is expected to under-perform the Nova Minerals. But the pink sheet apears to be less risky and, when comparing its historical volatility, Mineral Res is 16.83 times less risky than Nova Minerals. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Nova Minerals Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  45.00  in Nova Minerals Limited on September 12, 2024 and sell it today you would lose (25.00) from holding Nova Minerals Limited or give up 55.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Mineral Res  vs.  Nova Minerals Limited

Mineral Res

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mineral Res has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Nova Minerals Limited

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Minerals Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nova Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mineral Res and Nova Minerals

The main advantage of trading using opposite Mineral Res and Nova Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mineral Res position performs unexpectedly, Nova Minerals can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Nova Minerals will offset losses from the drop in Nova Minerals' long position.

The idea behind Mineral Res and Nova Minerals Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.